From: Marty Rosenblatt [marty@p-i-a.com]
Sent: Wednesday, September 03, 2003 7:38 PM
To: rule-comments@sec.gov
Cc: Thomas Peterffy, Chairman
Subject: Fwd: Boston Options Exchange
Sirs,
As I understand the proposed change outlined below, it seems like this could only
help reduce my option costs. So, please approve this novel PIP approach on BOX.
Thank you,
Martin Rosenblatt
X-From_: ibmgmt@interactivebrokers.com Wed Sep 3 01:07:18 2003
Date: Wed, 3 Sep 2003 04:07:52 -0400 (EDT)
From: "Thomas Peterffy, Chairman"
To:
Subject: Boston Options Exchange
September 2, 2003
Dear Interactive Brokers Customer:
As you are probably aware, Interactive Brokers Group has been a major sponsor
of the Boston Options Exchange (BOX). In addition to being a pure electronic
exchange, BOX's major distinguishing feature is the Price Improvement Period
(PIP). By using the PIP, an order flow provider such as Interactive Brokers may
designate a marketable order for price improvement, which means that the order
will be auctioned off among market participants, in pennies, to generate the
best price for the order. The execution price will be guaranteed to be better
than the best price available at all the other exchanges at that moment (i.e.,
better than the prevailing "NBBO").
In addition, customers may also participate in the PIP, in direct competition
with market makers. You could, for example, tell us that you are bidding $2.20
for a particular option but are willing to go up to $2.22 if a PIP of a sell
order in that option takes place. In this case, IB would bid $2.20 and if a PIP
started we would match the initial PIP bid price of $2.21. If the bid for the
PIP order is raised to $2.22, we would match that bid on your behalf. Alternatively,
you could tell us to bid $2.22 in a PIP right from the start, so as to give you
time priority. The end result is that you have a chance, for the first time in
the U.S. options market, to trade against other orders between the quotes.
We think that the introduction of BOX will be of great benefit to public customers
because there will be price improvement over NBBO. Also, because customers may
participate on both sides of a PIP, there will be more customer-to-customer
trades. We believe that all of this will make the effective spread you pay, and
with that your total transaction cost for trading, diminish.
The proposed BOX rules have been published on the SEC website for a 21-day comment
period ending on September 12. For more information on BOX, or to read the BOX
rules, go to www.bostonoptions.com or go to the "SRO Rulemaking" section of the
SEC website at http://www.sec.gov/rules/sro.shtml. Chapter V, Section 18 of the
rules describes the PIP process.
We have received indications that the existing option exchanges, in their effort
to protect their franchise, are planning to fight the introduction of BOX. We
would like to ask you to read about BOX or to read the relevant parts of the
proposed rules. If you agree with us, as we hope you will, please send a simple
letter to the SEC telling them what you like about the proposed exchange and
asking them to approve it promptly.
You can send an e-mail to rule-comments@sec.gov or if you prefer, you can send
a hard copy letter. Letters and e-mails should reference "BOX - SR-BSE-2002-15"
and should be sent to:
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W. Washington, D.C. 20549-0609
We appreciate your consideration of this issue. Our goal remains to provide you
with the best possible market access at the lowest possible trading cost.
Sincerely,
Thomas Peterffy, Chairman